Wall Street Bonuses on or above target for 2007

This article is out of date. Yes, Lehman's results were better than nexpected, and Goldman's were stellar. But Bear Sterns's earnings were sub-par, as were Morgan Stanley's. Merrill Lynch is now expected to mark down its earnings significantly, and the news is that UBS will post a $3bn loss. Job losses on the mortgage and structured credit desks from this summer's turmoil have already been significant, which is not to say that other areas have not taken on new staff over the last year.

agreed...bonuses related to derivatives, cdo's, rmbs markets, and like cmtsuk says, structured credit desks will be below normal. I think the effect in financial positions outside this wont be as bad as expected.

time will tell. I have a bunch of friends with these jobs so Ill certainly be checking in around Jan/feb to see how they did.

Today the Dow is getting very close to reaching an all time high. I don't believe that's terrible for the Bonus situation in Wall Street. Particularly when we starting to enter the last quarter of year. Oh yeah Dow is above 14,000 and testing the all time high.

Out of date it's only a few weeks ago and since then the Dow has rocketed above the 14,000 level. It's approaching historical highs. As far as Bear Sterns goes it's share are doing very well thank you in fact I dare say that the Bear will also be a historical highs at years end.

spunky - do you work in financial services? I would guess not - your conclusions and misunderstanding of how a few weeks can make a difference show a lack of depth of knowledge. Also, the stock market doesn't distill everything - esp. if it is not incorporating everything. The situation is much more nuanced.

Nope I don't but I have friends who have very high level positions in the industry. Thanks, for asking though and yes I have spoken with them and let me just say life is very good.

BTW-Nova I didn't write the article titled "Lehman Profits Fall, but Give Wall Street a Lift" but according to you the writer must also have misunderstandings and lack of depth knowledge.
I dare to say your comments are as shallow as shower tray.

great, we're all very happy you have friends... The level of Dow Jones index has very little to do with credit/strucutured markets, and that's where the bulk of layoffs will come...

duh

This is an outdated article and clearly shows the lack of understanding by the OP.

Given the release of UBS and Citi's profit warning and layoff news today, and timing of this post using outdated information, one might think that the OP is trying to downplay today's news.

Too bad it backfired and the OP got called out by cmtsuk.

Here's today's info:

Wall Street Toll

Losses on securities related to home loans and leveraged buyouts are taking a toll on Wall Street. Morgan Stanley, Bear Stearns Cos. and Lehman Brothers Holdings Inc., three of the five largest U.S. brokerages, reported declining profits last month after reducing the value of their loan commitments and mortgage- bond holdings.

Merrill Lynch & Co., JPMorgan Chase & Co. and Bank of America Corp. will publish results this month. So far, Goldman Sachs Group Inc. has been alone among the largest securities firms in reporting higher profit in the period.

Merrill, the third-biggest U.S. securities firm, may record losses of as much as $4 billion on fixed-income assets, resulting in the lowest quarterly earnings in almost six years, Goldman analyst William Tanona said in a note to investors last week.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ayxRAeLa.TfU&refer=home

Aaaaaahhhhhh, big deal, who cares about a few more unemployed investment bankers/analysts/traders. My heart really bleeds for them. Maybe they can get real jobs where the economy gave give them a real market rate for their skills, like what the guys get for scrubbing cars at the local car wash.

In response to the main article about Lehman earnings: they are not nearly a good as they seem on the surface. Lehman are taking advantage of the new fair value accounting rules that let banks mark down their own long-term debt against write downs in similar long term assets that they own. Net result is that Lehman revenue was about $400 mm higher than it would have been under the old rules. This is a one time deal - it's certainly not 'revenue from continuing operations'. Morgan did not do this. They also included some hedging proceeds which Morgan did not. So Lehman are hurting just as bad as everyone else out there. They just took full advantage of the rules to make the numbers look as good as possible. This does not equate to lots of free chash at year end for bonuses.

Urbandigs: you are correct that the losses are tied to certain business units but when the whole bonus pool is reduced everyone gets hurt to varying degrees. I've found in the past when you have a year like this, where the banks have an excuse to not pay someone well, they will take full advantage of it. They will have to pay the people who have direct claim to P&L generation but for every one of those people there are 20+ others who 'help' the process and are in a position to get shafted.(analysts/structurers/quants/IT/lawyers/operations/HR/compliance/risk etc + traders who had a mediocre year) This is worse the further down the IB leaderboard you go. i.e. I wouldn't expect it from Goldman.

ChumpSpotter: I wouldn't care either only the rule of thumb that applied in the past is that for every one job lost in banking, four are lost in other sectors in the city.

"I wouldn't care either only the rule of thumb that applied in the past is that for every one job lost in banking, four are lost in other sectors in the city."

All that means is the city has to diversify it's economy a little more. More jobs in tech, film, biomed, etc.

eh eh eh More jobs in film is just what the money doctor ordered .That in itself will even out the economic playing field in Manhattan. Eh Chump your a real financial genius. Eh Eh eh

Chumpspotter, you really are a limited intellect. Had you any clue, even any clue about the numbers of persons who are employed in this city based almost entirely upon the existence and proliferation of major (and minor) investment banks, perhaps you'd be a tad less bitter. Literally every sector you can name in this town owes its existence, if even tangentially, here to these banks. every one. so go the banks, so goes the economy. very simple. my guess is that you are an artsy fartsy type but were there no wealth in this town generated by the i banks, do you really think broadway would survive? would tourism survive? would the film and television industry want to set up here? ask yourself that. We'd be Cleveland without these banks. Remember that.

NY economy is far more diverse than you think, Randomguy71. No need to be so defensive. I guess your arty friends must give you a hard time. Or maybe you just imagine that if you had arty friends they would give you a hard time. No matter.

The Economist did a special report on NY's economy a year ago. It debunked the idea that NY is so dependent on i-banking. Huge sectors of NYC's economy in money management, advertising, design, etc. are quite independent of how the i-banks are doing. NYC is a talent magnet, for a lot more than you think.

Now get back to analyzing that spreadsheet!!

for the record - i am not even an ibanker. I am however one of the hundreds of thousands of people, if not millions, who make my living directly off their existence. Wonderful that you place more emphasis on what people who choose to write for a periodical have to say rather than those who actually create wealth. And one can argue that all the areas you cite--i.e. 'money management', 'advertising' and 'design' ARE related, even tangentially, to investment bank activity. We can't all be as independently wealthy as you, I suppose.

I realize entirely how NY is overdependent on investment banks, hence my comment about the need to diversify the economy a little more. You misread my posts and think I am suggesting gutting the banking industry. No, no, far from it. I am merely poking fun at all these articles that are written about the coming potential "plight of the poor banker". By tying yourself so much to one large industry you have to expect at some point a downturn or correction is going to cause some pain. What I suggest is more along the lines of a gentler weaning away. (But if the road to more diversity requires a little pain in order to come to the realization its a good idea, my quota on sympathy does not extend to investment bankers....... its used up on other things)

Would tourism survive?

Yes. With a little more diversification, New York would be more interesting and more tourists would come. Culture is what brings tourists here and a more diversified economy sows the seeds for more culture. Who wants to come to New York and constantly run into snobby Bankers left and right?

Would the film and television industry want to set up here?

They set up in LA didnt they? Not exactly the financial capital of the world. Would a film industry level the economic playing field? No but it would provide more varied job opportunities for the middle class in production and some more interesting newly minted millionaires. I may have some more interesting neighbors or people to bump into at restaurants. It would be a more natural synergy with New York's art scene (and fashion) wouldn't it? Maybe Wall Street will even rub off on them and you'll get more documentaries on the banking industry and corporate America. Who knows they may be even more sympathetic? Out of Hollywood all you get is Gordon Gecko villain types in film. Don't you want more movies about how our heroic, intrepid, investment bankers are going to save the world with the next IPO? The general public doesn't know how you are all so busily sweating and thinking away (time for a sarcasm note?) to come up with the next great financial product, deriviative, etc to change our lives in ways we dont even realize? Our dear heros house America with their MBSs, secure the future of our neighbors, police, teachers, firefighters by diligently managing their pension funds. The STORY NEEDS TO BE TOLD, Don't You Think?

(Who is the limited intellect now?)

More tech and biomed would help the region. Interesting how you missed that comment. Wouldn't Wall Street benefit from being in closer proximity to a New York Silicon Valley? Maybe to replace the defense industry that use to be on Long Island. Tech is a hot sector. If you lived in and among more techies wouldn't some of the creativity and innovation rub off? Your tech inclined children would be able to grow up and if talented have more opportunities to stay in New York. Don't like artsy fartsy types? Hang out at the bar after work with your tech buddies from the startup a few floors down.

Am I bitter, naaaahhhhh.... possibly just bored? Am I artsy fartsy? Hmmmmmm.... no..... I prefer the term "creative"........ or maybe arty with an edge? MasterQ put it very well, I refer you to his comment.

I might be a little more forgiving if all these i-bankers I run into actually were able to give me better investment advice. I am not an MBA yet manage to do very well without them. Point is, New York is a big city, the banking industry is very very mature........ All this focus on one area is underutilizing New Yorks potential....... and its time broaden horizons a little..... and you all sound like crybabies when you realize this years 300k bonus check may not be as big as last year..

Chumpspotter after reading that lengthy and thoughtful reply. I said to myself if the Chumpspotter spent as much time writing his rent checks as he does on the blogs maybe he wouldn't be so behind on his rent.
Wake up your rent was due on the 1st now get that checkbook out.

Spunky - you probable find it witty to keep posting these meaningless "your rent is due" messages all over streeteasy forums for a second months now...at least the guy above spent time to put his thoughts in writing so that nitwits like you could appreciate the fact that someone else may have an opinion that differs from yours...oh wait you don't have an opinion, your contribution and purpose is limited to reminding everyone that their rent is due...good stuff, Spunky

Looks like it'll vary a lot by business line. Two articles, discussing different data from The Options group:

http://www.nysun.com/article/63763

Excerpt:

"In addition to job cuts, Wall Street bankers can expect their bonuses to be slashed by as much as 40% versus last year, according to a report by Options Group, which tracks hiring and paying trends in New York's financial industry."

Now, here's a more middle of the road assessment for traders: http://www.advancedtrading.com/blog/archives/2007/09/outlook_for_tra.html

“It shows that big brokerage firms in New York are seeing falls in fixed income but equities is kind of making up for it,” says Eric Moskowitz, director and head of the compensation and consulting practice at The Options Group in New York."

In all fairness to Spunky, I did insult him in another thread just out of the blue, So I forgive him (Wow, I can't believe I am in a forgiving mood). He is still wrong though, I am not a renter. Though maybe I should stay off the message forums...... I do not post here often, but if I didn't, well people like MMafia might have fewer supporters and I might pick on my friends and family in real life more. It's less guilt giving insanely high market bidders on here a hard time.

NEW YORK (Reuters) - New York City could lose two jobs for every one cut on Wall Street, while anecdotal evidence shows that both residential and commercial markets might finally be starting to cool, a new report said on Wednesday.

Capsizing financial and real estate markets could torpedo the city budget.

"Barring a Wall Street (and Main Street housing market) miracle, the city faces a potential deficit reaching 5 percent of city-funded spending this year or more," the Manhattan Institute's report said.

Next year, there could be an even bigger deficit of 7 percent to 12 percent, the nonprofit research group warned.

Wall Street companies can produce up to one-fifth of city tax revenues. These employers added 20,000 workers from 2003 to 2006, causing other firms to hire 40,000 employees, the report said. Until scorched by the summer mortgage meltdown, this sector seemed poised to match or top 2006's record bonuses.

But now banks and brokerages are slashing tens of thousands of jobs, and Mayor Michael Bloomberg, who had to close a $5 billion deficit when his first term began in 2002, might again have to raise taxes or cut spending, the report said.

I'm not believing the numbers that any search firm comes out with. The change in my compensation or my colleagues compensation has never been in line with their predictions. You can't apply blanket percentages across all banks and giving a range for bonuses like "$500k to $5mm" doesn't tell you anything. If you're going to fabricate numbers, at least make them consistent:

"Wall Street bankers can expect their bonuses to be slashed by as much as 40% versus last year, according to a report by Options Group"

"Commodities traders could see increases in bonuses by about 10-to 15 percent, says Options Group’s Moskowitz. Equity derivatives traders will do fine, says Moskowitz who estimates they’ll receive increases of 10-to-15 percent, but “credit derivatives are still a mess,” he says, adding that traders of credit derivatives can expect to receive a 10-to-15 percent drop in their bonus paychecks."

TheStreets, when you get companies writing off billions of dollars translating to BIG double digit profit declines YoY (like the 60% drop for Citi), it doesn't really matter how you slice and dice it- the bonus pool (the pie) has shrunk big time and as a result, so will the payouts.

You are correct that individually, there will be discrepancies as you have witnessed, but when you consider the net sum, you cannot escape the fact that the pie itself has shrunk at an alarming rate.

Yeah, TheStreets makes a good point: the granularity of the data from employment/recruiter salary/bonus surveys is never fine enough to pick up the variations within different functions or departments.

The pie may shrink, but it affects the really big fish who are making the really big bucks the most.
The avg analysts/associates/vps only get a fraction of the pie anyway.

"The pie may shrink, but it affects the really big fish who are making the really big bucks the most.
The avg analysts/associates/vps only get a fraction of the pie anyway."

While correct, the magnitude of shrinkage we are talking here (60% for the largest US Bank for example) is so large that even the minions and second/third fiddles may get affected quite significantly.

Citi is not going to pay bonuses based on 3Q results. The 60% YOY drop is for discrete 3Q. YTD 3Q net income is done about 18%, and current guidance expects full-year net income down approximnately 13%. Not the end of the world when it comes to bonuses.

qwa, you bring up some excellent points (finally, some smart and informed posters... they exist!!!).

YTD being down 18% is still a very large drop, large enough to affect many employees and not just the sr. execs in my opinion. And there's still a lot more SIVs that STILL haven't been marked-to-market, so it would be prudent to say that there are additional writedowns looming in the near future.

The part that people are missing is this:

"The bad news for Citi was not restricted to leveraged loans and subprime. The bank also said its consumer division would see a $2.6 billion increase in credit costs stemming from behavioral patterns suggesting increased loan losses, worsening macroeconomic indicators, and higher mortgage delinquencies"

We're not just talking LBOs and Sub-Prime here... we're talking regular mortgages, credit card costs, as in consumer spending behavior. That is not a good sign, especially for those who continue to fool themselves into thinking that the credit bubble bursting is a 'contained' phenomenon. Clearly, it's not.

mmafia, I guess we'll see. But with Goldman setting the bar, I don't think it will be another record year, but it won't be too bad for most of the analysts/associates/vps... and "too bad" being relative of course.

(and by that I mean Goldman still had a great year and I doubt they will be cutting bonuses, putting pressure on the other guys to deliver decent bonuses as well.)

I don't know what % of people here have had a "year end compensation discussion" but there seems to be a lot of misunderstanding about how bonuses get paid in banks. Yes there is a bonus pool and it does get sliced up. But it's not sliced on some percentage basis and shortfalls do not hit the top first. Some people are directly responsible for P&L - if they did well they will get paid just as much as they would have got paid last year. If not they will leave. Then they make sure their key guys get paid well and that people who support their business will get paid ok. The execs make sure they look after themselves. Whats left over is a lot smaller than last year and thats why the jr analyst on the CMO desk gets screwed. "Hey, you're a key guy, we're set for a rebound next year and the bank really values your contribution, you know everyone got hit this year, next year should be good". Thats the way it works. What options does the lawyer who works in asset backed origination have when he doesn't like his bonus? He can't leave because all his piers got equally screwed and if Goldman would hire him he'd already be working there. But he's the lucky one - they just cancelled the mortgate IT project and fired 350 people the day before bonuses were paid.

What a interesting and innovative concept. Getting rewarded and paid based on ones performance. One would think that people like MMafia who probably fall thru the cracks in their organization just to survive deserve a bonus. No no just because you are a genius at kissing ass doesn't automatically qualify you for getting a year end bonus.

For what it's worth...
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aetgXD1EKZsw

From today:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ah4MVMCJWZqI

anotherguy, don't bother.... spunky will post another dated article to try and convince you otherwise.

nothing you can do for those who are in denial. what really cracks me up is just how screwed the secondary and SIV markets are... and how well mainstream media has eschewed coverage.

we got BIG problem kiddos, and the creation of this super conduit bailout fund by Paulson sets the standard for moral hazards.

The article is not dated, unless you feel September 17th 2007 was light years ago. The year is not over yet so we will see but even if bonuses are down 30% or so I don't feel that will have a major impact on the Manhattan market.

please define "major"

"please define "major"

Let me check with MMAfia's crystal ball and will get back to you with the exact number which of course will be factual.

No need for a crystal ball- just read the headlines. I've stopped posting links to mainstream headlines because the 'shift' in psychology is over: it's not a question of if prices will come down in Manhattan anymore but by how much.

Define "major"?

How about this:

Hundreds of Billions of $$$ of SIVs STILL cannot be priced or marked to market because there IS NO market, as in, there are no buyers. These writedowns we are seeing now (in the Billions only) are just scratching the surface, and even still, profits are down big time (check Bank of America today for example). The Fed, Treasury and large Banks are STILL dumbfounded on what to do with the HUNDREDS of BILLIONS of SIVs they are sitting on that currently is worthless since there are no buyers.

Well, not totally dumbfounded- they created the Superconduit Super Fund which is essentially a bailout Fund of about $80 billion. Purpose of this Fund? To buy time while the Fed starts cutting rates to a level low enough to generate demand once again.

Where's the $80 billion going to come from? First of all, $80 billion is nowhere near the value of SIV's currently stuck in never-never land. And the Fed will create the $80 billion fiat currency via monetary policy to buy the SIV's, further devaluing the already worthless USD.

In other words, what we are seeing right now is fallout resulting from the initial sliver of credit problems months ago.

TheStreets, an MBS lawyer can easily transition into ABS or straight corporate. And not many firms do MBS. Lawyers aren't the ones getting screwed (for once). the bankers are.

I'll be the first one to say mafia is a yutz but the guy is just plain dead on. this market is f*^^ed short term. there is not, contrary to popular belief, an umlimited number of foreigners looking for a pied a terre. And some folks have bigger concerns right now than which NYC pied a terre/funpad for their brat to buy. prices are headed one way short term. and it ain't up.

Gee if I had a nickel for everyone who has posted that the Manhattan real estate market was going down for the past 5 years I'd be a wealthy man. However, this must be the time right. All I have to sat MMAFia that by the end of next week I want my rent check. This time I would like it by the 1st of the month. Please also prepare yourself for a raise in rents once your lease expires. I know you can't afford to buy an apt or get bank approval for one so expect the rent hike to be at least 10 to 20%.

Spunky, while I do enjoy your "pay rent" comments which you always appear to resort to when you have nothing else to say, I do want to clarify:

1. Yes, I am a renter

2. I choose to be a renter even though I can afford to buy a house- dumping $200k - $300k of my cash into a Manhattan apt for downpayment wasn't and still isn't a good way to manage my assets. I'm not super rich and that kind of money means a lot to me, which is why it's been sitting in Gold instead of sitting in another depreciating asset like a house (the time is coming soon for a short-term pullback in Gold which would introduce an excellent buying opportunity for those of you looking for a good entry point).

3. My rent checks are automatically sent from my online checking account before the 1st of each month (i.e. I don't physically write the checks or worry about them being late) =D

4. I like my landlord- he's a good guy, fixes any problems I have, hasn't raised rents and keeps everything in the house working and in good condition. In fact, he just installed a new boiler in the basement to improve efficiency since he pays for heat.

1) Spunky may resort to questionable "pay rent" comments, but it's about the same level as your "down with manhattan real estate" postings. Can't you see by now that he does it in response to your equally annoying droning?
2) Real estate... depreciating asset. Heh funny. Do you also have a car mmafia?

Note: I also agree gold is good, but I also think diversification is better.

Yes, aifamm, both spunky and I understand this, but it's entertaining and that's why we both perpetuate it. Just having fun.

I don't think it's funny that real estate is currently depreciating (and will continue to) around the country. A lot of people will be put in very dire situations.

My car is lot cheaper than a $1-2 million apartment in the city. In other words, I don't stay up at night worrying about what would happen if my car devalued 20% next year. But I sure would have many sleepless nights if I was worried about my house being devalued 20% next year.

I'd say a car is a bad comparison anyway you slice it ...unless you're a collector of limited run autos from big names, that "asset" is depreciating from day one

spunky--you're missing the point and i know i'm late tot he party. point being buy nyc propertty TODAY and it is going down. Actually, poorly renovated and non-"hot area" are currently losing value. Even "hot" areas are getting offered less than ask. I see this currently as I'm actively looking for a place and every r.e. broker I encounter tells me the same thing. Thus RIGHT NOW, its not a great idea. Perhaps in 6 months that will change. hell, it may change in 3 months. Eventually, of course, the values will ascend. But for NOW, they aren't. This "everybody's been saying this for 5 years" stuff is crap. We didn't have a massive credit collapse in the last 5 years, least not in this country. Not sure what business you're in, but colleagues and clients are disappearing as if this were Stalingrad circa 1952. This is not a pretty environment. Mafia sounds like a guy who is just against owning a home. If he makes his money in securities, then thats his ballgame.

In my case, plopping down $150K on a coop or even 10% on a condo RIGHT NOW is a waste of money given transaction costs involved and my time horizon for holding the asset. I recently sold out of a coop because i saw this coming and had no desire to live there for another 2-3 yrs. I have news. if you're in a coop in NYC right now, good luck selling at your price b/c I'm seeing it--people just aren't getting their price and you just may have to wait this market out and god only knows how long that will take. and i'm not god nor are you.

Mafia--I assure you your landlord didn't replace the boiler for your benefit. Plus I'd bet you he put a heat timer on it to govern heat usage.

mmafia, i'm just saying its funny that
1) you're ok with a car (and that I pegged you on a car)
2) you called real estate a depreciating asset, almost comparing it to a car.
Obviously you're focusing on the short term pressure, but funny/ironic to me nonetheless since I see it to be an opportunity rather then a depreciating asset.

Having a car also adds some more light into the equation/picture as to why you are still adamant renting because that is costing you probably around $500-$1000 a month on top of your rent.

totallyanonymous, you are right! landlord put in the boiler because a former tenant sued that the house wasn't properly heated. IMO, it's well heated, but it looks like the former tenant had personal issues and used the boiler to get back at the landlord. Since I get along well with the landlord, he lets me control heat in our apartment which I appreciate and as a result, don't abuse.

aifamm, the difference in cost between a $40k car and a $1.5 million apartment in the city makes comparing them like apples to oranges. Yes, they are both depreciating currently, just like both apples and oranges are fruits. But they are not in the same class to me. I worry much more about one than the other since it makes up a much larger portion of my savings. BTW- this has been argued to death in many many other forums (re: the whole depreciating asset house vs car topic), and I don't want to beat that dead horse back to life, but you do see how a car and a house are not exactly the same.

The car's been paid off. Actually, it's my wife's car. I used to have my own car, which I sold because it was just sitting in the garage over 80% of the time collecting dust.

Fair enough. My question is then why are you trolling real estate boards if you don't want to buy real estate?

Well that's an excellent question. Just like many others, I do want to buy, but I don't want to buy at the peak (at least here in Manhattan) of the largest housing bubble in decades. So I do my due diligence, and part of that is to monitor local microeconomic conditions as well as local prices, which StreetEasy is an excellent tool for.

I used to never read these message boards, but one day, I was looking for comments about a particular coop and saw a lot of misinformation going on. But really, the main reason why I continue to come back, as I've stated before, is to read spunky's entertaining posts. =D

Good luck to you then, but as I have said in other threads:
1) If you're waiting for some buy/rent calculator to trigger a buy, then the fundamentals of Manhattan will have drastically changed if it triggers "yes" and I may at that point be bearish myself.
2) I have rarely disagreed with your thoughts on other investments, particularly gold/commodities, but I do think having a balanced portfolio should include real estate.

Cheers

the buy/rent calc was positive in the late 90s here in many apartments. Still is in some studios. But 1 and 2 BRs? Forget it. That train left the station years ago. Sellers still have their heads in the clouds but they're realizing they should have sold last year. It'll get worse before it gets better.

MMafia, at what point could you have bought an apt in nyc, no matter how small? How long have you lived in nyc? How long ago did you start looking at purchasing? What do you do for a living? Broadly.

Thanks.

A few more data points relevant to your discussion:

http://www.dealbreaker.com/2007/10/the_year_of_the_wall_street_la.php#more

http://www.tregny.com/pdf/Market_Report_Oct_07.pdf

spunky will love these...

Market_Report_Oct_07 tells us very little. Small decreases from Sept. are expected, average rents are still higher than they have been all year. You can still expect rent increases based on YOY comparisons, just maybe not as much as if your lease came up in Sept. Again, no surprise here. The report is written like the bottom is falling out of the market however the numbers don't support that. If we see these delcines for another 6 months, well, we may have something here.

MMAFia-Let me get this straight. You are presently renting a house and being nicety nice to the landlord just because he replaced a broken furnace and you don't want him to hold back on the heat even though if he wants to keep it at 65 when it minus 15 outside he's within his legal right. Now in addition to this you and your wife share one car. You also indicated you are heavily invested in gold. So I have to assume you take a bus into the city everyday, working for a fledging mortgage company of some type selling mortgage related instruments. I realize you have carved out this life style that all of our our envious of and certainly we look forward to your continued insight on how and why the Manhattan market will drop at least 30-50 %.

somehow i keep thinking about those James Bond episodes where he's in a locked room and then the floor starts retreating, revealing the pit of crocodiles underneath. now Bond always manages to escape. kind of how i view Manhattan real estate. looks perilous, but time goes by, and there you are, still standing.

"Manhattan market will drop at least 30-50 %" wow, where did u pull that from? and when did I ever say that?

I never thought anyone would be 'envious' of my 'life style', but hey, whatever floats your boat.

I WAS heavily invested in Gold but cashed out last week to patiently wait for the imminent correction so that I can accumulate even more when it happens soon. I still don't understand how Gold all of a sudden came into the picture in your attempt to analyze my 'life style', but am not surprised that it somehow did.

I do take public transport to work, but I do not work for some mortgage company or have any involvement with 'mortgage related instruments'.

divvie, I moved to NYC about three years ago and could have bought when I relocated, but chose not to. As far as what I do, I create computer models for a Hedge Fund to ascertain exposure, liquidity and other types of Investment Risk. I also do some Attribution and Back Office transaction processing work, although I've offloaded most of that to other team members now.

I never thought anyone would be 'envious' of my 'life style', but hey, whatever floats your boat."

Yeah that's right I'm envious in fact the the first thing I say to myself when I wake up in the morning is "boy I wish I could be MMAfia and have his life style"

Could be better, could be worse:

http://www.businessweek.com/bwdaily/dnflash/content/oct2007/db20071022_581691_page_2.htm

MMAfia:

So you think gold is pulling back, hmmm? Maybe in the short term, but I respectfully disagree. I'm still buying gold for the long term.

he thinks gold is pulling back because it went down a few days ago so now he's out of gold. When it goes up a 100 oz he'll let everyone know that he's been heavily invested in it. BTW he long oil and has been since it was 30 a barrel.. He's also heavily invested in Google as well and has been since it was trading at 100. He's also been short the US dollar for quite a while and he's been offered the Yankee manager spot but is trying to negotiate a higher base.

If he works for a hedgefund then their complaince dept would not allow personal trading at that level, type or frequency.

MMafia that is

oh. i see it now. its a midwest or whatever transplant who cam here, railed at the cost of real estate and thinks he's smarter than everyone here, including his fund manager bosses. i will now cease listening to anything he says about nyc real estate.

MMAfia also advises Warren Buffet and George Soros. They depend on him and won't make a financial decison without consulting MMAfia first. MMAFia is now forming a hedge fund that will have 5 trillion in assets.He will manage the hedge fund only after purchases a Baseball team.

pseudonym, considering the amount of Commercial Shorts at the moment, a short-term pullback (aka accumulation/buying opportunity) is imminent. Long-term, Gold can only go up given the current currency debasement policies the Fed is pursuing. I cashed out so that I can increase my position by buying in after the pullback. How about this? go to this freely available page for some publicly available analysis (you may have already read this):

http://www.kitco.com/ind/Kirtley_Sam/oct232007.html

totallyanonymous, not from the midwest. Actually lived in Beantown (go SOX!) for a long time after graduating from school there. folks- this is not rocket science, anyone looking at the data will understand where local real estate is heading. and there's no way on earth that i'm even half as smart as my boss- she used to be a systems modeler for mission control at NASA.

exis- I am legally bound from trading most securities. As a result, I have to deal with ETFs, Futures, Indexes, Funds and the like.

and finally, spunky, my dear daily entertainment fix- I am extremely far removed from that level of decision making. but do keep the posts coming!!! =D

New NY Observer slams door on bonus BS. Sorry, Lexus-leasin' brokers -- it's over.

Damm MMAfia you must be in town because the stench of your BS is debilitating. At least when you are on the other side of the river I only sense it when the wind is blowing from the north

MMAfia wrote--"considering the amount of Commercial Shorts at the moment, a short-term pullback (aka accumulation/buying opportunity) is imminent. Long-term, Gold can only go up given the current currency debasement policies the Fed is pursuing. I cashed out so that I can increase my position by buying in after the pullback. How about this? go to this freely available page for some publicly available analysis (you may have already read this):"

my my when I read crap like this I have to laugh and say to myself that this guy is probably the biggest BS artist out there.

wow, spunky, your lack of understanding is so obvious its hilarious~!!

did you even bother to click on the Kitco commentary that I posted earlier? the pullback has not happened yet- there's still time to profit before the pullback to either the 50 or 200 DMAs. Clearly you do not have any experience with precious metal commodities, because if you did, you would understand how historically, the Private Longs always bite the dust once the Commercial Short positions go to record levels, which it is right now. and that PUBLIC knowledge that's FREELY available- Kitco has just compiled it and made it 'easier' to read and understand.

while you're at it, why not read this:
http://news.yahoo.com/s/bw/20071023/bs_bw/oct2007db20071022581691

"It's official. This is the worst year ever for layoffs in the U.S. financial-services industry -- and there's still more than two months to go."

Umm.. still want to argue that bonuses will be "on or above target for 2007"? Again, clearly you have no clue as to what's really going on.

But keep it up! It's quite entertaining, especially since you're starting to run out of arguments and resorting to baseless rants which are even more entertaining.

MER -6.02%

bonuses, hehe

mafia, i know beantown and i like beantown, but nyc ain't beantown. your point of reference with respect to real estate is obviously skewed. i am in no way an "it won't happen this is NYC" guy with respect to a market correction, but the NYC market is buffered significantly more than any other metro area in the US, including beantown which lets face it is not a major attraction in this country. Only a cross border downturn will affect nyc real estate at this point. I truly believe that 9/11 jumpstarted foreign (and domestic) investment here real estate-wise, possibly for morbid reasons. you'll recall (or maybe you won't) that after 9/11 prices dropped 30% in the short term, and many companies were threatening to move to NJ and the midwest. Most didn't and the commercial market tightened up significantly and we all know what happened to residential. This market is insulated from the rest of the country, whether you like it or not. You may be a great stockpicker but this is not a stock picker site. And clearly you're afraid of real estate because its something you know very little about. btw, are you a woman? you sound like one.

>> I am legally bound from trading most securities. As a result, I have to deal with ETFs, Futures, Indexes, Funds and the like.

You left out real estate. And that is one BIG understated reason why manhattan real estate is different.

and I thought gold was going up because the US dollar continues to weaken, I didn't realize that "Private Longs always bite the dust once the Commercial Short positions go to record levels, which it is right now." I feel silly.

On another note, Jack Welch was on CNBC this morning. I like Jack. He seems to think that the worst is over with the credit crisis and that the "incredibly resilient liquidity market" has worked through the worst of it. He thinks that by March, it will be done with. Couple that with another rate cut and you may as well forget all of those doom and gloom scenarios. I agree with Jack. So for everyone on the sidelines, be happy with the 5-6% you can get below ask at today’s prices. It is not going to get any easier to buy Manhattan real estate

WWWD - What would Warren do (Buffet, that is). Well, he's fairly risk averse (kind of humorous for a guy who buys so many insurance companies), so I doubt investment in the New York real estate market would be high on his list. I don't know what he's into these days, but not long ago I read it was currency.

totallyanonymous, you're right- Beantown, as much as I love it, is not NYC. I am not a good stock picker. Even if I was, I can't trade stocks because it's illegal for me to do so. I'm also not a woman, although I'm not sure what that has to do with anything.

I am also not 'afraid' of real estate, but I'll tell you what I am afraid of. What I am afraid of is buying what will probably be the largest purchase (of debt) in my life at a price that's at the peak of a multi-year boom cycle. With the same money, I believe that I can get more 'house' in the next few years. Since I'm in no rush at the moment to get myself into a huge mortgage debt, I am holding off on buying at the moment.

aifamm- yes, there are many investors (local and foreign) in NYC real estate.

With the ensuing meltdown on Wall St's financial firms, the record layoffs (confirmed and official as I posted above), and the poor bonus outlook, the local NYC real estate market (and high-end retailers) appear to have much more potential downside than upside at the moment. That's too much risk for me to dump a large portion of my life savings on.

What worries me is that this is just the appetizer- the real pain (mortgage delinquency tsunami) has yet to arrive according to mortgage reset schedules published by CSFB and company. For example, $50 billion is scheduled to adjust this month (October 2007). In March next year, as estimated $110 billion is scheduled to reset (Fed is worried about this and will be forced to cut rates to minimize damage from these ARM resets since ARMs are based on short-term interest rates unlike the fixed 30 yr mortgage variants which track the 10yr Treasury that the Fed does NOT directly control). The pains we are seeing now in the form of write-downs by Financial Companies are a result of reset induced delinquencies from Q2 this year (foreclosure lag time). See where this road is leading?

JuiceMan, Gold WILL continue to go up, but nothing ever goes straight up without corrections along the way.

What I'm saying is that if you are willing to take the risk and try to time the market so that during necessary corrections on Gold's journey upwards, you accumulate more during these temporary downturns to increase your overall position for the long run. One decent indicator over time is the Commercial Short positions- they are decent indicators of when to 'buy on the dips'. Hmmm... judging by your response, it looks like you didn't bother reading the link I posted either.

Fair enough- Jack has his own opinions. So does Marc Faber. and so do you and I.

"I am also not 'afraid' of real estate, but I'll tell you what I am afraid of. What I am afraid of is buying what will probably be the largest purchase (of debt) in my life" --MMAFia

MMAFia don't be scaredy cat. How much longer do you want to keep kissing your landlord ass just so he can jack up the heat so your wife won't complain to you. One of these days your wife is going to want to decorate the house and feather her own nest. Man she must be wondering what the hell did I marry here. She was be a loving wife to put up with your stubbornness.

The gulf in the spoils widens between firms (see Goldman reference about 5 paragraphs down). The question is, since these are 9-month figures, whether the pain is already priced into local growth expectations?

* * *

Merrill's Average Compensation Slides 27% in First Nine Months
2007-10-24 13:37 (New York)

By Christine Harper
Oct. 24 (Bloomberg) -- Merrill Lynch & Co.'s average
compensation per employee slid 27 percent in the first nine
months of 2007 after headcount increased and revenue slumped
because of writedowns on subprime securities.
Merrill, the third-biggest U.S. securities firm, set aside
$11.6 billion for compensation and benefits through the end of
September, 15 percent less than a year earlier as revenue dropped
23 percent. The average per employee dropped to $181,308, the
lowest of the top five Wall Street firms.
Merrill reported the largest quarterly loss in its 93-year
history today because of $8.4 billion of writedowns related to
home loans and debt products. Chief Financial Officer Jeffrey
Edwards told analysts that the New York-based firm increased the
portion of revenue it sets aside to pay employees by almost nine
percentage points to 58.1 percent.
The higher ratio ``reflects our focus on continuing to
recruit, retain top-tier talent to drive our growth
initiatives,'' Edwards said. Company officials ``do not expect to
reduce overall compensation levels in line with our significantly
lower revenues, given that managers and employees of other
businesses are producing record performance.''
Merrill employed 64,200 people at the end of September, 16
percent more than a year earlier, according to a company
statement today.
Revenue and pay per employee at Merrill contrasts most
sharply with Goldman Sachs Group Inc., the largest and most
profitable Wall Street firm. Goldman reported last month that it
set aside $16.9 billion to pay salaries, benefits and bonuses in
the first nine months of its fiscal year, topping the record sum
it paid for all of 2006.

--Editor: Dickson (ocb).

I'm not arguing whether gold will go up or not, I don't know enough about the subject to have an opinion. Simply, I thought that gold prices were inversely correlated with the value of the USD, and now that speculative money is going into gold, prices will go up disproportionately to the USD (sort of like Florida coast real estate). Gold will eventually crash (a la dot com...real estate..etc) and we'll be on to the next thing. People trumping gold investment now are the folks that are already in and trying to run the market up, get out, and leave the suckers with their losses (hmmm, that is a hedge fund strategy isn't it?). If you know how to time the market, go for it. I hope you do well. For me, I'll stick with real estate.

Actually spunky, that's how it began... I had the hardest time trying to convince my wife that now is not a 'smart' time to be buying in NYC.

What's interesting is that she actually turned around, and now sends ME links to articles about why we shouldn't buy now. But what's REALLY surprising is that she now has a genuine interest and we get into discussions about sub-prime and why there shouldn't be a gov't bail out and yada yada... a couple of years ago, she would not want to talk for even 10 seconds about finance and the economy. go figure.

MMAFia you have a very patient wife than. Look I love my wife and she fell in love with this apartment in the West Village. Did I think it was expensive at the time yes. Did I think that the value might decrease yes. But I looked at the expression on her face when she saw it, I could afford it, and I love her and I bought it. I didn't try to convince her that the real estate market was overpriced so let's rent until prices fall to a fair price. Each situation is different so I can appreciate that. I just don't agree with trying to time the Manhattan market when it comes to place to live in.

http://www.bloomberg.com/apps/news?pid=20601103&sid=awxGt55HkOmM&refer=news

look, flunky, there's this topic with your name on it. it looks silly now and it will look down right moronic in 3 months. maybe you should start another topic with the title "wall street bonuses set to tank" as backup?

zizizi--November 1st. Let's not be late please

MAFIA--- If you want a house, great deals are to be had in commuter burbs in NJ. If its an NYC apt you want, you haven't been here long enough to realize that your sentiment is exactly what everyone has been thinking since Q1 of 02. Real Estate, and particularly NYC Real Estate, is like a helium balloon. It keeps going up. Sure there are downturns here and there but it has an upward trajectory and you can attempt to time the market but thats a fool's game. If you're looking to swoop in on adistressed nyc property, get to the back of the line. Go to open houses. There are still bidding wars on rightly priced units. Good apartments still sell. They always have and always will. Wait if you like, Lord knows I've tried but the ship will sail right by you but you do whats best for you (and the wife).

Actually, ironically there was an msn piece just today on WWWD. He's investing in a maker of pre-fab homes. Luxury, not. We don't have the land in Manhattan, so I guess we won't be able to be his almost-trailer trash.

Do the math, people. About 10,000 properties released this year (some resales). Over 90,000 estimated residential units created from 2007-09 (not counting the west side development to support the subway extension, I think bids were due recently for that huge tract of land, that will occur a bit later). Add rising tax amounts on properties with 5-10 year abatements, no tax abatements on most properties laying foundation after a certain point (06, I believe), the overdevelopment of family size apartments considering the school space we have, and the probable return of strict 50% owner occupied rates and mortgage insurance for 90% down. New York certainly hasn't been immune in the past. I do find it interesting that one Gramercy development (first said condo, then mixed, then rental, now condo again) has only issued its marketing materials in Ireland. Interesting move, but I'm not so sure it's sound.

Some of these units will obviously be rentals, but we're still talking the luxury market here. I really don't think your bonuses matter at this point. If you make a lot of money, you've already bought your own owner-occupied unit. There are only so many newbies a year. You may be worried about the extra units you bought as investments. There are some very interesting rentals coming on the market.

Look, you can call us bitter renters. I actually made the decision not to have a second child based on a number of factors: the cost of a larger apartment, cost of private school, time my husband could spend with our children if we moved to the burbs, I don't drive so only Bronxville or Pelham seemed viable, cost of properties etc. Much of this choice was caused by a market that was ARTIFICIALLY INFLATED BY INAPPROPRIATE LENDING STANDARDS. I think eventually I will get a decent apartment at a price reasonable for our fairly high income (top 1%), and I won't be paying more than 30% of our after-tax income on it either (really, Italian granite is not truly necessary, and even if I were to get it, I don't know that I'd want the extra cost). I'm 44 and unwilling to try fertility treatments (and too tired) so I'll never know if I would've had another child. I still don't consider myself bitter, but maybe I'm working myself up to it.

Can anybody say shareholder derivative actions?

As expected:

http://www.reuters.com/article/marketsNews/idUKN2620740620071026?rpc=44

CUT TO: Little Black Arrows, amassing over Manhattan. Shrieking BROKERS fill the darkening streets....

here is one too

http://biz.yahoo.com/rb/071026/countrywide_results.html?.v=7

so what does the article say? for the 5 firms listed in aggregate, comp per employee is down 6% from a record year in 2006. down at 2 firms, flat at another, up at 2 others. and yes, there are several other firms where comp is down, as well as others where it is up. where is the end of the world here?

Q1 and Q2 accrued comp were 10-15% higher than Q1 and Q2 last year. Hmmm...which means dismal Q3 pulled YTD down to 5-10% BELOW YTD last year. Q4 is looking as bad as or worse than Q3 so FY2007 should be down 35-45% over last year. I'd say IB bonuses down 35-45% will hurt demand and psychology but what do I know.

Yes I agree everyone is so convinced that Manhattan Apt the prices will drop.Wouldn't it be ironic if prices continue to go up.

q4 will not be worse. majority or write downs were taken in 3Q. guidance from firms is mostly return to profiability, with still some concerns lingering. so 30 to 45% down is way off base.

Re: spunky
But isn't the RE market partially dependant on perceived value? Not just on supply and demand. If enough people think that the market will drop (either rightly or wrongly) it will. Though it might take 6-12 months.